How to Write an Incorporation Agreement?
Also known as a pre-incorporation agreement, a corporation agreement is an important legal agreement when a starting business entity takes its first steps to incorporate. It sets out essential details, such as the name of the corporation to be formed, the purpose of the said corporation, the names of the directors and officers, the distribution of shares, and the salaries of the directors and officers, thus useful in clearing the roles and responsibilities of the principal parties and preventing future disputes and misunderstandings in an incorporated entity. This must be created prior to the actual formation of the business entity as a corporation.
Writing an incorporation agreement is a tough and challenging task. However, with the help of the steps on how to an incorporation agreement below, you will surely never fail to miss the key points in your basic agreement. These are as follows.
1. Write the Unique Name of Your Corporation
In the corporate world, it is a must that no two corporations will have the same name. Hence, you must perform a name availability search prior to registering your name to make sure that your corporation name is not yet used by other entities. It is also required to use a suffix, such as "Inc." to indicate the limited liability status of the corporation.
2. State the Purpose of Your Entity
You must write a statement in the joint agreement explaining why the business is formed. This can be general or specific as you desire, but make sure that it is not too specific when you reflect it in your articles of incorporation because it might limit the flexibility of your corporation in the future when it is already operating.
3. Write the Business Address and the Registered Agent
If it has already been selected, you must list the corporation's principal physical and website address to establish the area where you will be operating. Moreover, you must also select a registered agent, the person assigned to receive all official communications sent to the corporation.
4. List the Details of the Directors and Assigned Personnel
As a minimum, you must list the name and addresses of the directors of the corporation. You must also assign a person who can conduct financial transactions, such as signing checks and opening bank accounts, and business transactions, such as doing negotiations and signing a contract agreement. This is important not just to identify the person in charge but also to make any transactions structured and organized.
5. Write the Capital Contribution
Finally, you must state the number of capital contributions being made by the initial shareholders of the corporation in the agreement. If you are a stock corporation, a corporation that issues shares of stocks and is a for-profit corporation, it is usually required that at least twenty-five percent (25%) of the capital stock must be subscribed and that at least twenty-five percent (25%) of the subscribed capital stock should be fully paid up. However, this may differ according to the state laws in the area where you are establishing your corporation.